Collect tax in the United States

Businesses selling goods and services to customers in the United States (US) might need to collect sales tax. That’s the case even if your business isn’t established (based) in the US. Tax rates and rules vary by region. You can also use Stripe to regsiter on your behalf.

When to register for tax collection

Different rules determine when and how you need to register to collect tax depending on the region. US regions can choose which level and type of activity in the region means a business needs to collect tax there. This is called nexus. A business can have nexus in a region if they have:

• Physical activity, such as having remote employees based there or storing inventory in a warehouse.
• Economic activity, such as an amount or total value of transactions within a time period.

If you have nexus in a US region, you need to register for a license to collect tax on sales to customers in that region.

To understand the economic nexus thresholds in each region use the links above. Stripe only monitors if you have reached an economic nexus tax threshold for sales outside of the region your business is based in. Learn more about economic nexus.

See Thresholds to get insights about your potential tax registration obligations. Stripe also notifies you with email and Dashboard alerts when you need to register to collect tax. Learn more about how the monitoring tool works.

Register to collect tax

Each US state, US territory, and the US capital has its own tax authority. You need to individually register to collect sales tax in each region where you have met the registration requirements. Start by going to the regional tax authority website. If you need help finding the right links to register for tax, select a region from the list above. You can also use Stripe to register on your behalf.

Learn more about the sales tax registration process in the United States.

Streamlined Sales and Use Tax Agreement (SSUTA)

The Streamlined Sales and Use Tax Agreement (SSUTA) was created by a coalition of states to help businesses manage their sales and use tax obligations across the United States. Twenty-four US states are members of the SSUTA agreement. However, individual states can still decide which products and services are taxable in their state. You can learn more and register for sales and use tax permits in all SSUTA member states on the streamlined sales tax registration website.

After you’ve registered with a state, go to Registrations to add your registrations to Stripe in the Dashboard and start collecting tax on your transactions in that location.

How we calculate taxes

What you sell and where you sell impacts how tax is calculated on your sales. Different rules apply when your customer is located in the same region as your business or located somewhere else.

Stripe calculates tax on a transaction taking into account the following factors:

• the location of your business
• the tax registrations you’ve added to Stripe
• the location of the buyer
• the type of the product sold (based on which product tax code you assigned to your product)
• the status of the customer (whether they’re an individual or a business)

As part of the tax calculation process, Stripe collects addresses for both your business and customers. We verify these addresses, convert them into geographical coordinates, and match them to the relevant tax jurisdiction boundaries. We then use these jurisdictions as input for the tax calculation process.

Sales to a customer located outside the state your business is based in

If your origin address is in the US and is different from the state or territory your customer is located in, Stripe always calculates tax based on your customer’s location. This also applies if either your origin address or your customer’s location is in the District of Columbia while the other is not.

Sales to a customer located within the same state as your business

If your origin address is in the US and in the same state or territory as your customer’s state or territory, Stripe generally calculates sales tax based on your customer’s location. The customer’s location is also used when your origin address and your customer’s location are both in the District of Columbia.

However some states use your origin address instead of the customers location depending on the type of product or service you sell:

• In Arizona, Illinois, Missouri,Pennsylvania, Tennessee, and Virginia, Stripe applies tax based on your business location.
• In California, state, county, and city taxes are based on the origin address, while district taxes are based on the customer’s location.
• In Mississippi, Ohio, Texas, and Utah, Stripe applies tax based on the origin address for physical and digital goods. Sales of services are taxed at the destination address.

Report and file your taxes

Stripe provides reports of your completed tax transactions. Go to Registrations to access these reports. Learn more about the different types of reports.

You’re responsible for filing and remitting your taxes in the US. Stripe doesn’t file taxes on your behalf. You can find where to file your return for each state in our tax returns guide.

For automating filing in the US, we recommend using TaxJar’s AutoFile solution.

Marketplace tax liability

A marketplace facilitator is an entity that contracts with third parties to promote their sales of property, digital goods and services by performing various functions to initiate and complete transactions. In the US, marketplace facilitator laws now exist in every state and territory with a sales tax, as well as the District of Columbia. These laws generally require the marketplace facilitator to collect and remit sales tax on behalf of the third-party sellers conducting business on the marketplace. As a marketplace facilitator, your compliance obligations, from registration requirements to reporting and filing, are determined by the specific laws of each region.